This is just a post for me to share some of my ideas that I am reading about for my rental properties. The current book that I am reading is how to rent and flip properties to turn into a millionaire. It is fairly dated, but some of the ideas are good ones. The basic premise is this:
- get a mortgage on a property (with 25% down)
- put a small amount in of your own money each month for minor renovations (painting, new faucets, etc.)
- rent the property out
- after two years, sell your property for more than you paid for it and then use the new equity to repeat the process
A few interesting things come out of this. Number one is that you only own one (extra) property at a time. This is different from my other ideas of renting out several properties. He also says that you should pay down the principal relatively quickly, because that equity will turn into a more expensive property to purchase in the future.
He has lots of good ideas about renting out properties, but the major ones are that it is easier to rent your property out if the price is less than average in your area, that you should be looking at demographics and purchasing property in those areas (the Walmart rule...if Walmart is building stores in a community they are growing!).
Finally, the price that you set should be equal to less than one quarter of the average person's monthly salary. The idea behind this is if a person makes say $2000 per month, then paying $500 for rent doesn't seem too expensive to pay. I personally believe that it should probably be a higher ratio (especially for homes to rent or something other than a single room) but that is the ratio that he discussed. As I continue the book (whose title and author I forget at the moment) I will post any other interesting ideas I read about.
Showing posts with label real estate. Show all posts
Showing posts with label real estate. Show all posts
Wednesday, December 2, 2009
Friday, November 13, 2009
Rental Properties
I will eventually be a landlord. That is my next financial goal (other than paying off my student loans). It has been said that 90% of the world's millionaires got started through real estate. I have been renting out parts of my house since it was purchased and will continue to do so with a second property eventually.
The reason for this post was a discussion in the staff room during my prep yesterday. At least two or three teachers have rental properties, and one of them was complaining about a tenant that he had and said to me, "Don't ever get started in a rental property!". I countered that with on paper it looks really good and the numbers work out and he said "It's not worth it!".
He was getting ready to file the paperwork to get a tenant evicted from one of his properties (he has five that he rents out) who didn't pay the rent. He said that after he filed the paperwork, it would take a minimum of 44 days for them to get out (by law). Plus this would have to be done at his expense (the legal paperwork and the hiring of a "sheriff" as he called it to remove the person from the house if necessary).
He also said that he was selling all of his properties because of this bad experience (we'll see in a few days when he cools down if he still feels the same way...I'll chat with him on Monday). I asked him if he could ask for financial references and be more picky with his tenants but he said that he did ask for financial bank statements, but that he had difficulties with his properties staying vacant for two reasons: the lost income in a month and the fact that insurance companies don't like insuring vacant properties (because there is more chance for vandalism and theft).
Another teacher also chimed in and said that also wouldn't recommend rentals. They have had two really great tenants, and one horrible one, and the horrible tenant has pushed them away from it. I asked the first teacher about renting to students and he said that it was probably a better idea because you know what to expect with students, and that they have more cash and their parents will also sign the lease agreement so you shouldn't get stiffed for money. I would imagine that the maintenance would be much higher on a place like that.
For my own foray into real estate, there is a college in my town, so either I will begin with a house that I will rent to college students, or I will get a duplex or whatever and only post for them at places where me or my friends work at, ensuring that I get people in there with a real salary. The teacher said to me, "Remember, people who are good tenants eventually buy their own houses...the ones that rent forever are poor tenants". A few things for me to keep in mind.
The reason for this post was a discussion in the staff room during my prep yesterday. At least two or three teachers have rental properties, and one of them was complaining about a tenant that he had and said to me, "Don't ever get started in a rental property!". I countered that with on paper it looks really good and the numbers work out and he said "It's not worth it!".
He was getting ready to file the paperwork to get a tenant evicted from one of his properties (he has five that he rents out) who didn't pay the rent. He said that after he filed the paperwork, it would take a minimum of 44 days for them to get out (by law). Plus this would have to be done at his expense (the legal paperwork and the hiring of a "sheriff" as he called it to remove the person from the house if necessary).
He also said that he was selling all of his properties because of this bad experience (we'll see in a few days when he cools down if he still feels the same way...I'll chat with him on Monday). I asked him if he could ask for financial references and be more picky with his tenants but he said that he did ask for financial bank statements, but that he had difficulties with his properties staying vacant for two reasons: the lost income in a month and the fact that insurance companies don't like insuring vacant properties (because there is more chance for vandalism and theft).
Another teacher also chimed in and said that also wouldn't recommend rentals. They have had two really great tenants, and one horrible one, and the horrible tenant has pushed them away from it. I asked the first teacher about renting to students and he said that it was probably a better idea because you know what to expect with students, and that they have more cash and their parents will also sign the lease agreement so you shouldn't get stiffed for money. I would imagine that the maintenance would be much higher on a place like that.
For my own foray into real estate, there is a college in my town, so either I will begin with a house that I will rent to college students, or I will get a duplex or whatever and only post for them at places where me or my friends work at, ensuring that I get people in there with a real salary. The teacher said to me, "Remember, people who are good tenants eventually buy their own houses...the ones that rent forever are poor tenants". A few things for me to keep in mind.
Monday, October 26, 2009
Suggestions for Real Estate
I went with my girlfriend to a wedding yesterday afternoon. We were sat at a table for brunch with a younger couple and we asked what they did. Adam said that he was a real estate agent, and he became one because he got his real estate license so he could save himself fees as he bought and sold properties for himself. My ears of course perked right up.
He said that he owned thirteen properties and did so because he started working right out of high school and decided that he didn't want to (work that is). It took him five years to get going but he had his first place by age 24.
I asked him after a bit what he would recommend for someone looking to get started, as far as the type of property. What he said really surprised me. He said to get a fourplex if possible right off the start. The advantage is that he said, as compared to renting out a single family home, is that even if one or two spots are vacant, you won't be taking the entire financial hit. He also suggested that it might be better to purchase a place outside of my local area and hire someone to look after it for me (as that is what he is trying to do now). Again, all logical things that make sense. I was worried about the cost and he said that his girlfriend just bought her first fourplex for $209,000 (which is considerably less than I thought it would be).
He also mentioned the snowball effect that real estate has: that once you start making money off of it, it becomes easier and easier. The more money that you have, the easier that it is to get finance and refinance loans. He also mentioned that it is important to pay for a good team around you: mortgage broker, lawyer, accountant and real estate agent.
This was a good inspirational weekend for me financially and pointed me to the path of success I think. Now its just time to save for some down payments and begin my financial dreams!
He said that he owned thirteen properties and did so because he started working right out of high school and decided that he didn't want to (work that is). It took him five years to get going but he had his first place by age 24.
I asked him after a bit what he would recommend for someone looking to get started, as far as the type of property. What he said really surprised me. He said to get a fourplex if possible right off the start. The advantage is that he said, as compared to renting out a single family home, is that even if one or two spots are vacant, you won't be taking the entire financial hit. He also suggested that it might be better to purchase a place outside of my local area and hire someone to look after it for me (as that is what he is trying to do now). Again, all logical things that make sense. I was worried about the cost and he said that his girlfriend just bought her first fourplex for $209,000 (which is considerably less than I thought it would be).
He also mentioned the snowball effect that real estate has: that once you start making money off of it, it becomes easier and easier. The more money that you have, the easier that it is to get finance and refinance loans. He also mentioned that it is important to pay for a good team around you: mortgage broker, lawyer, accountant and real estate agent.
This was a good inspirational weekend for me financially and pointed me to the path of success I think. Now its just time to save for some down payments and begin my financial dreams!
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